Maybank, CIMB and Public Bank Too Big To Fail (Highlights from TheEdge 6th Feb)

Malaysia

• BNM said Maybank, CIMB and Public bank is the three important banks that is ‘too big to fail’ in the domestic financial system, where its failure could lead to disastrous economic downturn in Malaysia. The three banks have a total market capitalization of RM200 billion, making top three largest banks in Malaysia. Hence, they are defined as “domestic systemically important banks” (DSIB) and are required to maintain higher capital buffers to meet regulatory capital requirement that include a higher loss absorbency requirement (Basically, they need to cater more money in the reserve to prevent them from collapsing due to major events). The requirements for these DSIBs will come into effect on Jan 31^st, 2021.
• Ministry of Finance (MoF) is preparing its economic stimulus package which will be launched soon to cushion the economic impact from the rampaging Wuhan virus. As mentioned previously, 19% of Malaysia’s tourism comes from China, hence the effect to the local economy could be devastating, Credit Suisse said. China account for 17% of the global GDP.
• 74 close contacts of the first Malaysian Wuhan virus patient are identified and monitored to prevent Wuhan virus from further spreading in Malaysia. To date, more than 490 people has died, and 24,000 people has been infected by the Wuhan virus.
• Brent fall to the lowest point since December 2018, as fear of Wuhan virus spiraling around the world continues.  While it might be beneficial to mid-stream and down-stream oil & gas sector’s margin, their product prices could be compressed due to lower global demand. Chief Market Strategist of Axicorp said oil equities doesn’t seem to be bullish in the short term unless the economic impact can be quantified, or the outbreak is controlled. From current view, its less likely to be happening so soon. Crude oil takes up around 6.4% of Malaysia’s total GDP, and 16% of exports.
• GENM tumbled to RM2.94, the lowest since January 2019. Previously, Genting Malaysia announced the cancellation of all tour bookings from China for February. Its theme park is tentatively to be opened in 2020-year end, and this should be the ultimate life-saving straw for both GENTING and GENM.
• Singapore to MYR also fallen below RM2.98/SGD after Monetary Authority of Singapore (MAS) said there is room within its exchange rate to accommodate weaknesses in the currency due to Wuhan virus. MAS maintained its policy during yesterday’s review.
• Independent directors of AirAsia and AAX were summoned by Securities Commission over corruption allegations yesterday. Mahathir today state that the AirAirsia-Airbus deal is not a bribe if an offset in a business transaction is for a specific purpose (Mahathir’s logic: Kalau duit tak masuk poket, tak kira bribery). Under my knowledge, any offerings that aim to influence the actions of an individual in a particular transaction is A BRIBE.
• Uzma increased its stake in Stegap Ventures to 86%, allowing the group to consolidate a higher percentage in the joint venture’s earning. The oil and gas servicing provider currently has an orderbook of RM700 million for the next five years. Despite the downturn in local O&G sector, the joint venture was able to expand its operations as they double their workforce at the end-of 2018.
• ChemOne Group, the Singapore-based conglomerate launched a US$3.4 billion aromatics plant called Pengerang Energy Complex (PEC) in Johor scheduled to start in the second half of 2020. It aims to take part as an important catalyst in Malaysia’s downstream value chain, ChemOne said in a statement. It will have a processing capacity of 150,000 barrels per day of condensate plus side feed of naphtha, an aromatics output of 2.3 million tonnes/yr, energy products output of 4 million tonnes/yr, and hydrogen of 50k tonnes/yr.
• Palm oil inventory of January at its lowest since June 2018, mainly caused by dry weather and lower fertilizer usage. CPO production dropped to 9%, the lowest since March 2016. It is expected that low production and inventory should improve palm oil counter’s margin as prices increase. Risks involved include lower exports to China due to the virus epidemics. India’s ban should be offset by Pakistan’s deal to increase palm oil imports from Malaysia.  
• FWD takaful is partnering with Naluri Hidup Sdn Bhd to provide a digital therapeutics programme to certificate holders of its online family cancer plan.
• Gas Malaysia’s revenue set to improve in the upcoming quarter under the implementation of the third-party access (TPA) regime. Previously, they were only allowed to distribute gas to customers consuming up to 5 million standard cubic feet per day. The gas subsidy was previously removed under the Incentive-based Regulation (IBR) Regulatory Period 1 from 2020 to 2022, which should help Gas Malaysia to retain its position as Malaysia’s biggest gas provider. Gas Malaysia’s recurrence income is strong as contracts between Gas Malaysia and its existing customers is set only to expire on 2022.

Globally

• US allegedly plan to pull out deals from World Trade Organization (WTO) Government Procurement Agreement (GPA) worth US$1.7 trillion. GPA has the purpose of opening government procurement markets to foreign competition (in this case, US), and also to improve the transparency of public purchasing. This move is to be honest expected as Donald Trump march further into protectionism economy by cutting foreign competition. This would create chaos for foreign companies that bid for access to the US’s public procurement market and complicate trade talk between UK and EU. Members including UK, Japan, South Korea, Canada and EU will lose access to US public procurement tenders.
• EU aims to add Serbia, Kosovo, Montenegro, Albania, Bosnia and North Macedonia into the union bloc. In October last year, Emmanuel Macron (French President) halted the process of admitting new members blaming it as a key historic error previously. In the following month, it submitted a proposal which supports accession for Balkans nations.
• France face another crisis over pension reform where mass demonstrations have been ongoing for more than 50 days (French people likes revolution, don’t they?).
• Amazon joined the trillion dollar club on Tuesday, as its share price surged up 2.3%. Currently, there are four members in the trillion dollar club including Alphabet (Google), Apple, Microsoft and Amazon. Jeff Bezos stand firmly as the world’s richest man, as his net worth exceeds Bill Gates by almost  $40 billion.
• Instagram generated more than a quarter of Facebook’s total sales, bringing in about US$20 billion in advertising revenue. Youtube recorded US$15 billion in advertising sales, losing slightly to its social media counterpart.
• US’s export numbers to be slightly weakened as Wuhan virus delay the effect of Phase 1 trade deal. The deal will increase US’s export by US$77 billion in the first year, US$123 billion in the second year amounting to around US$200 billion. US market is slightly affected by the virus pandemics in China but gained its momentum to close higher at 29,290 as of 5February.

Disclaimer: This is simply to note down the major incidents that I should take note in TheEdge NewsPaper. I cover as much local news as possible and do not include global news that do not interest me. Please subscribe and read the original TheEdge for more information.